Better ETF: Vanguard's Mega-Cap MGK vs. iShares' Small-Cap IWM
Key Points
IWM holds nearly 2,000 small-cap stocks with a higher yield, but costs more than MGK.
MGK focuses on mega-cap tech growth with a heavier sector tilt and deeper five-year growth, while IWM spreads across healthcare, financials, and tech.
IWM trades with high liquidity and a slightly lower five-year max drawdown.
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The Vanguard Mega Cap Growth ETF (NYSEMKT:MGK) and iShares Russell 2000 ETF (NYSEMKT:IWM) differ sharply in both cost and portfolio focus, with MGK offering lower expenses and tech concentration, while IWM provides broader small-cap exposure and a higher yield.
Both funds are index-based, but MGK targets the largest U.S. growth stocks, whereas IWM tracks the small-cap Russell 2000 universe. This comparison looks at cost, performance, risk, and portfolio makeup to help investors weigh which approach may appeal to different goals.
Snapshot (cost & size)
| Metric | MGK | IWM |
|---|---|---|
| Issuer | Vanguard | IShares |
| Expense ratio | 0.07% | 0.19% |
| 1-yr return (as of 2026-01-22) | 14.4% | 18.2% |
| Dividend yield | 0.4% | 1.0% |
| Beta | 1.20 | 1.34 |
| AUM | $32.5 billion | $73.7 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.
IWM carries a higher expense ratio than MGK, making MGK the more affordable choice on fees, while IWM offers a higher dividend yield that may appeal to income-seeking investors.
Performance & risk comparison
| Metric | MGK | IWM |
|---|---|---|
| Max drawdown (5 y) | -36.01% | -31.91% |
| Growth of $1,000 over 5 years | $1,929 | $1,256 |
What's inside
IWM holds 1,951 stocks, offering broad exposure to U.S. small-caps with sector weights led by healthcare (19%), financial services (16%), and technology (16%). Its largest positions, such as Bloom Energy Class A Corp. (NYSE:BE), Credo Technology Group(NASDAQ:CRDO), and Kratos Defense and Security (NASDAQ:KTOS), each account for less than 1.1% of assets, keeping single-company risk low. With a fund age of 25.7 years, IWM provides long-standing access to the small-cap segment.
MGK, by contrast, is highly concentrated in technology (70%), with top holdings like NVIDIA (NASDAQ:NVDA), Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT) making up over a third of assets. While MGK holds 69 stocks, it focuses on the largest U.S. growth names, resulting in greater exposure to tech sector trends and mega-cap company performance.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Choosing between the Vanguard Mega Cap Growth ETF (MGK) and iShares Russell 2000 ETF (IWM) is about deciding on the type of exposure to the stock market you want.
MGK is about investing in big tech companies, given its 70% weighting towards the technology industry. Due to the rise of the hot artificial intelligence sector, tech is an area expected to experience a lot of growth over the next several years. However, MGK is not very diversified, so if the tech market enters a downturn, the ETF’s performance will be severely impacted. Adding to this is that MGK holds only 69 stocks, making it reliant on the performance of a handful of mega-cap companies, such as Microsoft.
IWM is the opposite of MGK. It targets small-cap companies, and is highly diversified across several sectors and businesses with nearly 2,000 stocks in the ETF. This means if a particular industry or group of companies experiences a decline, the others can help buoy IWM’s performance. The tradeoff is in the ETF’s higher expense ratio although that’s offset to a degree by its higher dividend yield.
For investors who want diversification and greater dividend income, IWM is the better choice. For those seeking exposure to the largest U.S. tech companies at a low cost, MGK is the way to go.
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Robert Izquierdo has positions in Apple, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Apple, Bloom Energy, Kratos Defense & Security Solutions, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
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